Applying for Exemption/Misc. Determination: Sample Questions

Limited Liability Company

Applications for exemption and miscellaneous determination requests are assigned to Exempt Organizations specialists for review. If additional information is necessary to make a determination, a specialist will contact the organization for the information. Here’s a list of questions that might be asked on this topic.

1. Submit a copy of your Articles of Organization (or its equivalent) which shows proof of filing with the state in which it is filed. Also submit a copy of your operating agreement (or its equivalent), if adopted.

[Instruction: Select Option A, B, or C (All require additional text under Include with A, B, and C) if an amendment is required to meet the 501(c)(3) Organizational Test.]

Option A. Need to amend purpose clause:

2A. The language of your [Insert type of document] does not sufficiently limit your purposes to those specifically described in Internal Revenue Code Section 501(c)(3), as required for tax exemption as an organization described under Section 501(c)(3). Therefore, your [Insert type of document] must be amended. We suggest you use the following language:

The organization is organized and operated exclusively for exempt purposes under Section 501(c)(3) of the Internal Revenue Code and may not carry on activities not permitted to be carried on by an organization described in Section 501(c)(3).

Option B. Need to amend dissolution clause:

2B. The language of your [Insert type of document] does not permanently dedicate your assets to purposes specifically described in Internal Revenue Code Section 501(c)(3) as required for tax exemption as an organization described under Section 501(c)(3). Therefore, your [Insert type of document] must be amended. We suggest you use the following language:

Upon the dissolution of the organization, assets shall be distributed for one or more exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not disposed of shall be disposed of by a court of competent jurisdiction in the county in which the principal office of the organization is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.

Option C. Need to amend purpose and dissolution clauses:

2C. The language of your [Insert type of document] does not sufficiently limit your purposes to those specifically described in Internal Revenue Code Section 501(c)(3) or permanently dedicate your assets to purposes specifically described in Section 501(c)(3) as required for tax exemption as an organization described under Section 501(c)(3). Therefore, your [Insert type of document] must be amended. We suggest you use the following language:

The organization is organized and operated exclusively for exempt purposes under Section 501(c)(3) of the Internal Revenue Code and may not carry on activities not permitted to be carried on by an organization described in Section 501(c)(3).

Upon the dissolution of the organization, assets shall be distributed for one or more exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not disposed of shall be disposed of by a court of competent jurisdiction in the county in which the principal office of the organization is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.

Include with Option A, B, and C

Submit a copy of the amendment [which shows proof of filing with your state of organization/which is signed by two officers or directors and shows the specific date it was adopted].

Note: Limited liability companies may not rely upon state law to meet [this/these] requirement[s].

3. The language in your organizational documents does not specify you are operated exclusively to further the exempt purpose(s) of your members. Please describe how or whether you will operate exclusively to further the exempt purpose(s) of your members.

4. The language in your organizational documents does not require your members be limited to Internal Revenue Code Section 501(c)(3) organizations, governmental units, or wholly owned instrumentalities of a state or political subdivision thereof. Please describe how or whether you will limit your members to the types of organizations stated here.

5. The language in your organizational documents does not prohibit any direct or indirect transfer of any membership interest in you to a transferee other than a Internal Revenue Code Section 501(c)(3) organization, governmental unit, or wholly owned instrumentality of a state or political subdivision thereof. Please describe how or whether you will limit transfer of any membership interest to organizations other than those stated here.

6. The language in your organizational documents does not prohibit the direct or indirect transfer of interests (other than a membership interest) in, or assets of, you to any nonmember (other than an Internal Revenue Code Section 501(c)(3) organization, governmental unit, or wholly owned instrumentality of a state or political subdivision thereof) for less than fair market value. Please describe how or whether you will prohibit the direct or indirect transfer of interests in, or the assets of, you to any nonmember (other than those organizations stated here) for less than fair market value.

7. The language in your organizational documents does not require that any amendments to your articles of organization and operating agreement be consistent with Internal Revenue Code Section 501(c)(3). Please describe how or whether you will require that any amendments to your organizational documents be consistent with Section 501(c)(3).

8. The language in your organizational documents does not prohibit you from merging with, or converting into, a for-profit entity. Please describe how or whether you will prohibit merging with, or converting into, a for-profit entity.

9. The language in your organizational documents does not prohibit you from distributing any assets to members that cease to be organizations described in Internal Revenue Code Section 501(c)(3), governmental units, or wholly owned instrumentalities of a state or political subdivision thereof. Please describe how or whether you will prohibit distribution of any assets to members that cease to be described as the types of organizations stated here.

10. The language in your organizational documents does not contain a contingency plan in the event one or more members cease at any time to be organizations described in Internal Revenue Code Section 501(c)(3), governmental units, or wholly owned instrumentalities of a state or political subdivision thereof. Please describe any contingency plans for such an event.

11. The language in your organizational documents does not state that your exempt members will expeditiously and vigorously enforce all of their rights in you and will pursue all legal and equitable remedies to protect their interests in you. Please describe how or whether your exempt members will expeditiously and vigorously enforce all of their rights in you and will pursue all legal and equitable remedies to protect their interests in you.

12. Please represent that all of your organizational document provisions are consistent with state limited liability company laws and are enforceable at law and in equity.

13. Please submit the names of your members and their employer identification numbers (or copies of their IRS exemption determination letters).

More information:

See the complete list of Applying for Exemption/Miscellaneous DeterminationSample Questions by topic.